Tag Archives: Section 421

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
President Obama faces a tough decision soon that will signal how his administration will tackle the problem of balancing our trade policies. This is the upcoming “Section 421 Tire Case” decision. Summary: American has been importing more and more tires from China while closing tire plants here. The surge in imports violates an agreement known as “Section 421″ that we made with China when they entered the World Trade Organization. The US International Trade Commission has ruled that China is violating Section 421 and recommended tariffs on tire imports. Obama has until September 17 to choose to implement this remedy, ignore it or do something in between. (Click through to a post with a number of links to background information on this decisions.)

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
When China was accepted into the World Trade Organization, they agreed that if we experienced import surges of Chinese goods that caused “market disruption,” we would be allowed to limit the import of those goods. The particular section of the agreement is called “Section 421.”
When the U.S. International Trade Commission (ITC) determines that the level of imports from China cause or threaten to cause market disruption to American producers of competitive products, it proposes a remedy that can include quotas or other relief. The President of the United States then makes a decision whether to enforce that recommendation.
President Bush repeatedly (seven times) refused to enforce Section 421 even when our own ITC found that American companies, factories and jobs were being lost. Bush claimed at the time that the destructive effects of dramatic, sudden increases in Chinese imports that Section 421 was meant to mitigate were actually good for the U.S. economy. Bush’s policy was the opposite of “protectionism” — it actually favored China’s companies over our own! (I think we’ve seen how that has worked out.)Very soon we will have an opportunity to see where President Obama comes down on this issue. The ITC has decided by a 4-2 vote that the U.S. tire industry has been harmed by a large increase in imports. They have recommended increasing tariffs starting at 55%, falling to 35% over three years. The Office of the U.S. Trade Representative now has to give its recommendation on this to the White House by Sept. 2.
President Obama has until Sept. 17 to make a decision. This is just one week before the upcoming G-20 summit in Pittsburgh. There is considerable pressure on him to to signal that the US will restore trade balance and help manufacturing in America, by following the rules of the WTO that China agreed to.According to the United Steel Workers, which represents workers in the tire industry, thousands of jobs are being lost and tire plans in the US are shutting down. Also at this page is a chart from the ITC showing that the benefits of enforcing remedies “are two-and-a-half times greater than the costs” to consumers.Mike Elk wrote the other day at the Campaign for America’s Future blog,

President Obama stands at a crossroads in the fight to rebuild the American economy.
President Obama has made a commitment in the past to uphold previously signed trade agreements. China, however, is violating these agreements by flooding the market with a massive 300 percent increase in tire imports in an attempt to wipe out American tire manufacturers. In 2004, China sent 14 million tires to the U.S. valued at $453 million. By last year, that had increased to 46 million tires valued at $1.7 billion.

Mike also points out,

Chinese importers, in conjunction with the Chinese Chamber of Commerce, have ironically formed a lobbying front group ironically named American Coalition for Free Trade in Tires. The coalition is run by Jochum, Shore & Trossevin, a Washington D.C. lobby firm run by former Bush trade officials who are cashing in on their years of U.S. government service to advise foreign competitors.

Jim Wansley, former USW Goodyear local president, testified about the impact of the closing of the Goodyear plant in Tyler, Texas where he had worked for 39 1/2 years:

The closure put hundreds of workers, many of whom had given decades of service to the plant, out of work. The closure was devastating to the workers and their families, but it is also being felt throughout the community of Tyler, Texas. Tyler has a population of about 100,000. Like many small and medium-sized towns that depend on manufacturing for middle class jobs, the loss of these jobs has taken its toll. The Goodyear plant directly benefitted the local economy by supporting local small businesses who served as its suppliers and service providers.
The plant also provided enormous indirect benefits. Jobs at the plant paid good wages and benefits, enabling workers to lead decent middle class lives, buy homes, send their kids to college, and save for retirement. These are the kind of jobs that support an entire community as families pay their doctor bills, buy new cars, and contribute to local charities. The plant and its workers were also an important source of tax revenue for the city, the county, and the state.
. . . The victims will not only be the workers and their families, but the suppliers, service providers, local businesses, and entire communities that depend on the industry. In sum, there is an enormous cost to doing nothing. If more plants like Tyler close, we can expect to suffer total additional losses of almost a billion dollars per plant, per year.